UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to

Commission File No. 1-9328

ECOLAB INC.

(Exact name of registrant as specified in its charter)

370 Wabasha Street N., St. Paul, Minnesota  55102

(Address of principal executive offices)(Zip Code)

1-800-232-6522

(Registrant’s telephone number, including area code)

(Not Applicable)

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 31, 2013.

296,011,975 shares of common stock, par value $1.00 per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ECOLAB INC.

CONSOLIDATED STATEMENT OF INCOME

The accompanying notes are an integral part of the consolidated financial information.

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ECOLAB INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying notes are an integral part of the consolidated financial information.

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ECOLAB INC.

CONSOLIDATED BALANCE SHEET

The accompanying notes are an integral part of the consolidated financial information.

(Continued)

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(a)         Common stock, 800 million shares authorized, $1.00 par value per share, 296.0 million shares outstanding at March 31, 2013, 294.7 million shares outstanding at December 31, 2012. Shares outstanding are net of treasury stock.

The accompanying notes are an integral part of the consolidated financial information.

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The accompanying notes are an integral part of the consolidated financial information.

(Continued)

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The accompanying notes are an integral part of the consolidated financial information.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Consolidated Financial Information

The unaudited consolidated financial information for the first quarter ended March 31, 2013 and 2012 reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, comprehensive income and cash flows of Ecolab Inc. (“Ecolab” or “the company”) for the interim periods presented. The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2012 was derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the company’s Annual Report on Form 10-K for the year ended December 31, 2012.

With respect to the unaudited financial information of the company for the first quarter ended March 31, 2013 and 2012 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 2, 2013 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the “Act”), for their report on the unaudited financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

In connection with its quarterly report on Form 10-Q for the quarter ended June 30, 2012, the company previously revised its consolidated balance sheet as of December 31, 2011 to correct the jurisdictional netting of long-term deferred tax assets and liabilities. This revision decreased other assets and other liabilities by $56.1 million and did not impact the consolidated statements of income or comprehensive income or the consolidated statement of cash flows for any period. This correction also impacted the March 31, 2012 interim financial statements. In addition to jurisdictional netting, additional classification differences primarily related to the January 2012 debt repayment were identified between deferred income taxes and income taxes payable which together had the net effect of reducing other assets by $57.1 million, income taxes payable by $64.9 million, and increasing other liabilities by $7.8 million as of March 31, 2012. There was no impact to total cash provided by operations on the statement of cash flows for the three months ended March 31, 2012, but cash used by deferred income taxes was reduced by $64.9 million with an offsetting impact to other liabilities within the components of operating cash flows. There was no impact on the consolidated statements of income or comprehensive income. The company believes that these revisions were immaterial to previously issued financial statements.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.       Special (Gains) and Charges

Special (gains) and charges reported on the Consolidated Statement of Income include the following:

For segment reporting purposes, special (gains) and charges are included in the Corporate segment, which is consistent with the company’s internal management reporting.

Restructuring Charges

The company incurs costs for restructuring activities associated with plans to enhance its efficiency and effectiveness and sharpen its competitiveness. These restructuring plans include costs associated with significant actions involving employee-related severance charges, contract termination costs and asset write-downs. Employee termination costs are largely based on policies and severance plans, and include personnel reductions and related costs for severance, benefits and outplacement services. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Contract termination costs include charges to terminate leases prior to the end of their respective terms and other contract terminations. Asset write-downs include leasehold improvement write-downs and other asset write-downs associated with combining operations.

Restructuring charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Amounts included as a component of cost of sales include supply chain related severance and other asset write-downs associated with combining operations. Restructuring liabilities have been classified as a component of other current liabilities on the Consolidated Balance Sheet.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     Special (Gains) and Charges (Continued)

Combined Restructuring Plan

In February 2011, the company commenced a comprehensive plan to substantially improve the efficiency and effectiveness of its European business, sharpen its competitiveness and accelerate its growth and profitability. Additionally, restructuring has been and will continue to be undertaken outside of Europe (collectively, the “2011 Restructuring Plan”). Total anticipated charges under this Plan from 2011 through 2013 were expected to be $150 million ($125 million after tax). Through 2012, $134 million of charges ($100 million after tax) were incurred.

In January 2012, following the merger with Nalco Holding Company (“Nalco”), the company formally commenced plans to undertake restructuring actions related to the reduction of its global workforce and optimization of its supply chain and office facilities, including planned reductions of plant and distribution center locations (the “Merger Restructuring Plan”). Total anticipated charges from 2012 through 2013 were expected to be $180 million ($120 million after tax) under this Plan. Through 2012, $80 million of charges ($59 million after tax) were incurred.

As the company looks for opportunities to enhance the efficiency and effectiveness of its operations, it has decided that because the objectives of the plans discussed above are aligned, the previously separate restructuring plans should be combined into one plan.

The Combined Restructuring Plan (the “Combined Plan”) will combine opportunities and initiatives from both plans and is expected to be substantially completed by the end of 2013. The Combined Plan will continue to follow the original format of the Merger Restructuring Plan by focusing on global actions related to optimization of the supply chain and office facilities, including reductions of plant and distribution center locations and the global workforce. Through the completion of the Combined Plan, the company expects to incur total pretax restructuring charges of approximately $80 million to $100 million ($55 million to $70 million after tax).

The company anticipates that approximately $70 million to $85 million of the total pre-tax charges represent net cash expenditures. The remaining pre-tax charges represent estimated asset disposals. No decisions have been made for any remaining asset disposals and estimates could vary depending on the actual actions taken.

During the first quarter of 2013, the company recorded restructuring charges of $20.8 million ($14.3 million after tax) under the Combined Plan.

Combined restructuring charges and activity related to Combined Plan since inception of the underlying actions include the following:

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.       Special (Gains) and Charges (Continued)

Nalco Restructuring Plan

Prior to the Nalco merger, Nalco conducted various restructuring programs to redesign and optimize its business and work processes (the “Nalco Restructuring Plan”). As of March 31, 2013 and December 31, 2012, the remaining liability balance related to the Nalco Restructuring Plan was $2.8 million and $3.4 million, respectively. Cash payments during the three months of 2013 related to this Plan were $0.3 million. The company expects to utilize the remaining liability by the end of 2013.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.       Special (Gains) and Charges (Continued)

Non-restructuring Special (Gains) and Charges

Nalco merger & integration costs

As a result of the Nalco merger, the company incurred charges of $3.8 million ($2.7 million after tax) and $102.5 million ($77.7 million after tax) during the first quarter of 2013 and 2012, respectively. Nalco related special charges for 2013 have been included as a component of special (gains) and charges on the Consolidated Statement of Income, and include integration charges. Nalco related special charges for 2012 have been included as a component of cost of sales, special (gains) and charges, net interest expense and net income (loss) attributable to noncontrolling interest on the Consolidated Statement of Income. Amounts within cost of sales and net income (loss) attributable to noncontrolling interest include the recognition of fair value step-up in Nalco international inventory, which is maintained on a FIFO basis. Amounts within special (gains) and charges include merger and integration charges. Amounts within net interest expense for 2012 include a loss on the extinguishment of Nalco’s senior notes, which were assumed as part of the merger.

Champion acquisition costs

In October 2012, the company entered into an agreement and plan of merger to acquire privately-held Champion Technologies and its related company Corsicana Technologies (collectively “Champion”). On April 10, 2013, subsequent to the close of the company’s first quarter, the company completed its acquisition of Champion.

As a result of the company’s efforts to acquire Champion, the company incurred charges of $10.0 million ($7.1 million after tax), during the first quarter of 2013. Champion acquisition related costs have been included as a component of special (gains) and charges and net interest expense on the Consolidated Statement of Income. Amounts included in special (gains) and charges include acquisition costs and advisory fees. Amounts included in net interest expense include the interest expense of the company’s $500 million public debt issuance in December 2012 and fees to secure term loans and short-term debt, all of which were initiated to fund the Champion acquisition. Further information related to the acquisition of Champion is included in Note 3.

Venezuelan currency devaluation

On February 8, 2013, the Venezuelan government devalued its currency, the Bolivar Fuerte. As a result of the devaluation, during the first quarter of 2013, the company recorded a charge of $22.9 million ($15.0 million after tax), reflected as a component of special (gains) and charges, due to the remeasurement of the local balance sheet. Due to the ownership structure in place in Venezuela, the company also reflected a portion of the impact of the devaluation as a component of net income (loss) attributable to noncontrolling interest on the Consolidated Statement of Income.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.       Acquisitions and Dispositions

Champion acquisition

In October 2012, the company entered into an agreement and plan of merger to acquire Champion. Based in Houston, Texas, Champion is a global energy specialty products and services company delivering product and service-based offerings to the oil and gas industry.

In December 2012, the company amended the acquisition agreement, such that Champion’s downstream business would not be acquired by the company. Further, in April 2013, subsequent to the close of the company’s first quarter, the company entered into a consent agreement with the U.S. Department of Justice requiring Ecolab to take certain steps designed to ensure continued independent competition utilizing Champion technology for deepwater Gulf of Mexico energy services. The amendment and consent agreement discussed above do not significantly impact the value of the acquisition transaction. On April 10, 2013, the company completed its acquisition of Champion. Champion’s sales for the business being acquired by the company were approximately $1.3 billion in 2012. The business will become part of the company’s Global Energy reportable segment starting in the second quarter of 2013.

Pursuant to the terms of the acquisition agreement, after adjustments for assumed debt and other adjustments, the company paid consideration of approximately $2.0 billion (valued based on Ecolab’s closing share price on April 10, 2013), consisting of $1.4 billion in cash and 6.6 million shares of Ecolab common stock. The company deposited approximately $100 million of the consideration in the form of shares of Ecolab common stock in an escrow fund to satisfy adjustments to the consideration and indemnification obligations of the acquired entity’s stockholders (including covenant obligations) for a period of two years following the effective time of the acquisition. Additionally, except under limited circumstances, the company will be required to pay an additional amount in cash, up to $100 million in the aggregate, equal to 50% of the incremental federal tax on the merger consideration as a result of increases in applicable capital gains and investment taxes after December 31, 2012. Such additional payment will be due on January 31, 2014, and will be based on 2013 tax rates as in effect on January 1, 2014.

The company funded the initial cash component of the merger consideration through a $900 million unsecured term loan, initiated in April 2013, the proceeds from the December 2012 issuance of $500 million of 1.450% senior notes due 2017 and commercial paper borrowings backed by its syndicated credit facility. The Champion acquisition is not material to the company’s consolidated financial statements; therefore, pro forma financial information will not be presented. Based on the timing of the close of the transaction, it is impractical to include a preliminary purchase price allocation.

Other significant acquisition activity

2013 Activity

In January 2013, the company completed the acquisition of Mexico-based Quimiproductos S.A. de C.V. (“Quimiproductos”), a wholly-owned subsidiary of Fomento Economico Mexicano, S.A.B. de C.V. Quimiproductos produces and supplies cleaning, sanitizing and water treatment goods and services to breweries and beverage companies located in Central and South America. Annual sales of the business are approximately $43 million. As shown in the table on the following page, approximately $8 million of the purchase price was placed in an escrow account for indemnification purposes related to general representations and warranties. The business became part of the company’s Global Industrial reportable segment during the first quarter of 2013. The purchase price allocation is preliminary, pending completion of the fair value determination of the acquired assets and liabilities, including valuation of the acquired intangibles.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.       Acquisitions and Dispositions (continued)

2012 Activity

In December 2011, subsequent to the company’s fiscal year end for international operations, the company completed the acquisition of Esoform, an independent Italian healthcare manufacturer focused on infection prevention and personal care. Based outside of Venice, Italy, with annual sales of approximately $12 million, the business is included in the company’s Global Institutional reportable segment. Further information related to the recast of the company’s reportable segments is included in Notes 6 and 13.

Also in December 2011, the company completed the acquisition of the InsetCenter pest elimination business in Brazil. Annual sales of the acquired business are approximately $6 million. The business operations and staff have been integrated with the company’s existing Brazil Pest Elimination business and is included in the company’s Other reportable segment. Further information related to the recast of the company’s reportable segments is included in Notes 6 and 13.

Other significant acquisition summary

Completed acquisitions during the first quarter of 2013 and all of 2012 were not material to the company’s consolidated financial statements; therefore pro forma financial information is not presented. The aggregate purchase price of acquisitions has been reduced for any cash or cash equivalents acquired with the acquisitions. As shown in the table below, during the first quarter of 2013, the remaining $13 million escrow balance related to the O.R. Solutions Inc. acquisition was paid to the seller. The 2013 contingent consideration activity relates to payments on legacy Nalco acquisitions. The 2012 contingent consideration relates to immaterial acquisitions completed during 2012. Based upon purchase price allocations, the components of the aggregate purchase prices of completed acquisitions during the first quarter 2013 and 2012 are shown in the following table.

The weighted average useful lives of identifiable intangible assets acquired in the above table during the three months of 2013 and 2012 were 13 and 12 years, respectively.

Dispositions

There were no significant business disposals during the first quarter of 2013 or 2012.

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Balance Sheet Information

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.       Balance Sheet Information (Continued)

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ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.                    Debt and Interest